Afterall, you financially protect your home, your car, your health, and your life with insurance. Why not do the same for what’s typically your largest debt obligation?
But a MPI policy might not be the best way to help your family pay off the house.
Here are three questions you should ask before you buy mortgage protection insurance.
Will my payout change?
The fundamental weakness of most MPI policies is that their payout decreases over time. As you work down your mortgage, there’s technically less to protect.
That becomes a problem if your premiums don’t change even as your payout plummets. You’ll be paying the same amount for less protection!
Ask about policies that feature a level death benefit. They’ll provide you with the same amount of death benefit regardless of how much is left on your mortgage.
Will my premiums change?
Premiums for MPI aren’t always fixed. The amount you pay for protection each month might decrease or skyrocket. Your wallet is at the mercy of your insurance provider!
Just remember that fixed premiums might be a double edged sword. It may be useful to have a policy with premiums that lower over time if you don’t have a level death benefit. Ask about fixed premiums for your MPI before you find yourself paying more for less!
Would life insurance be a better option? (hint: the answer may be yes)
Term life insurance may be a better choice than MPI. Payouts are guaranteed by the insurance company and premiums are fixed. You won’t have to worry about paying more for less protection as the years go by.
It’s also flexible. A chunk of the death benefit may knock out the mortgage, while the rest can fund college, health care costs, and living expenses.
There are special circumstances where MPI is superior to term life insurance. It typically doesn’t have medical restrictions, making it a good option for people who normally wouldn’t qualify for term life insurance. Just remember to ask your financial professional these questions if you decide to learn more!
This article is for informational purposes only and is not intended to promote any certain products, plans, or insurance strategies that may be available to you. Before taking out a policy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.
That’s not as crazy of a number as it might appear. Your income funds your family’s lifestyle and fuels their dreams. It’s how you pay for the house, the car, their education, and all the big and little things that make life run.
So what would happen if your income were to suddenly stop if you became ill or were to pass away?
Could your family afford to stay in the neighborhood? Would a child have to compromise their education? Would your spouse have to get an additional job to cover the daily costs of living?
Life insurance helps answer those questions in the event of your income disappearing.
So why buy a policy ten times your annual income?
First, it can act as a buffer while your family grieves and figures out next steps. A proper life insurance death benefit can allow your family to cover final expenses while they decide how to move forward.
Second, it can help your family pay off remaining debts and start funding future opportunities. This reduces the financial burden your loved ones will face in your absence.
Obviously, there are exceptions to this rule. A stay-at-home parent provides services and care that would be costly to replace and should be covered with that in mind. Families with medical concerns might need to consider a policy worth more than ten times their annual income.
But in general, a life insurance policy for ten times your income will help cover the major expenses your family will face.
Want a more precise estimate on how much life insurance you and your family need? Contact a financial professional. They can offer insights into how much coverage your specific situation calls for!
This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before purchasing a life insurance policy, seek the advice of a qualified and licensed financial professional, accountant, and/or tax expert to discuss your options.
All the ups and downs and uncertainty about the future have made it hard to tell if now is the time to buy or if it’s better to wait things out!
Fortunately, there’s a simple principle that can bring some clarity to your house hunting process. The 30/30/3 Rule can help you determine the right amount of house for you, whatever your stage of life! It’s composed of three mini-rules that we’ll explore one at time.
In other words, don’t sign away too big of a portion of your income in mortgage payments. This rule makes sure you have a healthy chunk of your cash flow available for other essential spending and building wealth. There’s definitely wiggle room to pay more as income increases, but 30% of your gross income is still a good target!
Banking up a solid stash of cash before you purchase can protect you from several threats. Using about 20% of that cash as a down payment can get you lower mortgage rates and dodge private mortgage insurance.² Also, keeping a 10% buffer provides you with a useful line of defense against unexpected repairs and appliance replacements. Just remember to keep your housing fund away from risk. Think of it as an emergency fund for your house rather than a savings vehicle!
This one is simple—Don’t buy a house you can’t afford! Do you make $50,000 per year? Shoot for a maximum $150,000 price tag. This is a simple way of narrowing your house hunting and managing your overall debt.
Let’s say you’re earning an income of $60,000 per year, or $5,000 per month. You read the headlines about the housing market and decide to snatch up a home. An opportunity presents itself—there’s a gorgeous home in a good neighborhood that’s selling for $180,000 (3X your annual income, and almost impossible to find) with a 7.3% interest rate (the national average). With monthly payments of $1,365 per month, you’ll only be handing over 27% of your income to the bank. Over $3,500 dollars of cash flow would be at your disposal!
What if you had the same income level but were looking at a house worth $360,000 (6X your annual income)? You’ll be forking over nearly half your income for your house. That’s a huge amount of firepower that could be used to build wealth or start a business!
Don’t forget to review your home buying plan with a financial professional who can help put this helpful principle into practice!
Policies may have standardized language, but each insurance policy should be tailored to your needs as they are today.
A lot can change in a short amount of time. An annual insurance review is a good habit to develop to help ensure your coverage still addresses your needs.
Life changes, and then changes again, and again. There are some obvious reasons to review your life insurance coverage, like if you’re getting married or having a baby – but there are also some less obvious reasons that may change your coverage requirements, like changing jobs or experiencing a significant change in income.
Here are some of the reasons you might consider adjusting your coverage:
Depending on what has changed, it may be time to increase your coverage, supplement coverage with another policy, change to a different type of policy, or begin to move some money into savings or update your retirement strategy.
Have you updated your beneficiaries? Did you get married or divorced? Did you start a family? It’s time to update your beneficiaries. Life can change quickly. One thing that can happen is that policyholders may forget to update the beneficiaries for their policies. A beneficiary is the person or persons who will receive the death benefit from your life insurance policy. If there is a life insurance claim, the insurance company must follow the instructions you give when you assign beneficiaries – even if your intent may have been that someone else should be the beneficiary now. Fortunately, this can be remedied.
How long has it been since you first set up a policy? How long has it been since your last insurance review? What has changed in your life since the last time you reviewed your policies?
Your insurance needs have probably changed as well, so now is the time to make sure you have the coverage you need.
You can get life insurance for a baby after it is born or even while the baby is still in the uterus. But it’s best to get it before you have children.
Why? Because pregnancies can cause complications for the mother – for both her own health and the initial medical exam for a policy. Red flags for insurance providers include:
Preeclampsia (occurs in 1 in 25 of all pregnancies)¹
Gestational Diabetes Mellitus (affects 2-10% of women)²
High cholesterol (rises during pregnancy and breastfeeding)³
A C-section (accounts for 32% of all deliveries)⁴
Furthermore, the benefits of youth are a powerful incentive to get life insurance for both the mother and father.
The younger you are, the easier it is to get life insurance. This can financially protect your family if you or your spouse have an unexpected event in their life.
If you are a new parent or thinking about becoming one, contact me to open up insurance for your soon-to-be growing family. We can discuss what options would be best for you.
¹ “Everything you need to know about preeclampsia,” Medical News Today, https://www.medicalnewstoday.com/articles/252025#Summary
² “Gestational Diabetes,” CDC, Aug 10, 2021, https://www.cdc.gov/diabetes/basics/gestational.html
³ “How to Manage Your Cholesterol Levels During Pregnancy,” Judith Marcin, M.D., Anna Schaefer, Healthline, https://www.healthline.com/health/pregnancy/manage-cholesterol-levels-during-pregnancy
⁴ “Births – Method of Delivery,” CDC, Oct 20, 2021, https://www.cdc.gov/nchs/fastats/delivery.htm
As part of a benefits package to attract and keep talented people, many employers offer life insurance coverage. If it’s free – as the life policy often is – there’s really no reason not to take the benefit. Free is (usually) good. But free can be costly if it prevents you from seeing the big picture.
Here are a few important reasons why a life insurance policy offered through your employer shouldn’t be the only safety net you have for your family.
Life insurance can serve many purposes, but two of the main reasons people buy life insurance are to pay for final expenses and to provide income replacement.
Let’s say you make around $50,000 per year. Maybe it’s less, maybe it’s more, but we tend to spend according to our income (or higher) so higher incomes usually mean higher mortgages, higher car payments, etc. It’s all relative.
In many cases, group life insurance policies offered through employers are limited to 1 or 2 years of salary (usually rounded to the nearest $1,000), as a death benefit. (The term “death benefit” is just another name for the coverage amount.)
In this example, a group life policy through an employer may only pay a $50,000 death benefit, of which $10,000 to $15,000 could go toward burial expenses. That leaves $35,000 to $40,000 to meet the needs of your spouse and family – who will probably still have a mortgage, car payment, loans, and everyday living expenses. But they’ll have one less income to cover these. If your family is relying solely on the death benefit from an employer policy, there may not be enough left over to support your loved ones.
The policy offered through an employer is usually a term life insurance policy for a relatively low amount. One thing to keep in mind is that the group term policy doesn’t build cash value like other types of life policies can. This makes it an ineffective way to transfer wealth to heirs because of its limited value.
Again, and to be fair, if the group policy is free, the price is right. The good news is that you can buy additional policies to help ensure your family isn’t put into an impossible situation at an already difficult time.
Because your employer owns the policy, you have no say in the type of policy or the coverage amount. In some cases, you might be able to buy supplemental insurance through the group plan, but there might be limitations on choices.
Consider building a coverage strategy with policies you own that can be tailored to your specific needs. Keep the group policy as “supplemental” coverage.
This is even worse than it sounds. The obvious problem is that if you leave your job, are fired, or are laid off, the employer-provided life insurance coverage will be gone. Your new employer may or may not offer a group life policy as a benefit.
The other issue is less obvious.
Life insurance gets more expensive as we get older and, as perfectly imperfect humans, we tend to develop health conditions as we age that can lead to more expensive policies or even make us uninsurable. If you’re lulled into a false sense of security by an employer group policy, you might not buy proper coverage when you’re younger, when coverage might be less expensive and easier to get.
A group life policy offered through an employer isn’t a bad thing – and at no cost to the employee, the price is certainly attractive. But it probably isn’t enough coverage for most families. Think of a group policy as extra coverage. Then we can work together to design a more comprehensive life insurance strategy for your family that will help meet their needs and yours.
There are two types of policies, but it’s more accurate to think of them as temporary or permanent. It’s kind of like renting an apartment vs. buying a home. When you rent, it’s probably going to be temporary, depending on your situation. However when you buy a house, the feeling is more like you’re settling down and you’ll be there for the long-haul. When you rent, you don’t build value. But when you buy, you can build more equity in your home the longer you own it.
Permanent life insurance can build a cash value, something a term policy can’t do. A term life policy only has monetary value when it pays a death benefit in a covered claim. Temporary and permanent policies also have some types of their own.
For example, term life insurance can include living benefits or critical illness coverage, as well as group term life insurance and key person life insurance, which is sometimes used in businesses. These are all designed to be temporary coverage. Here’s why. The policy might guarantee premiums for 10 years – or as long as 30 years – but after its term has expired, a term policy can become price-prohibitive. For this reason the coverage is, for all practical purposes, considered temporary.
Permanent Life Insurance: Designed to Last a Lifetime
As its name suggests, permanent life insurance is built to last. It’s a common perception that permanent life insurance and whole life insurance are synonymous, but whole life insurance is just one type of permanent life insurance.
At first glance, a permanent life insurance policy can seem more expensive than a term policy, but you’d have to consider the big picture to be fair in comparing the two options. Over the course of a full lifetime, permanent life insurance can be less costly – in part – because term policies become expensive if you require coverage after the initial term has expired. An investment element also helps to build cash value in a permanent life insurance policy, taking pressure off premiums to provide coverage.
If I’ve left you scratching your head over your options, no worries! Understanding the benefits of each type is important, and choosing which policy is best for you is a uniquely personal experience. Contact me, and we’ll review your options to find the right strategy for you and your family.
Benjamin is a 73 year old author. He lives in a small apartment in a mid-sized city that he leases for free from an old business connection.
Benjamin wakes up every day at 6am, stretches, makes instant coffee on his stove, and then starts typing. At this point, he’s not interested in writing the next great American novel—he wrote four of those in his early 50s. He splits the sizable royalties, which continue rolling in each month, between his spartan lifestyle and funding his top ten favorite charities.
His daughter is financially successful, so he has no dependents. He hasn’t received bills in the mail since 2010. His greatest expense is splurging on the senior special at the diner up the street, which is owned by one of his biggest fans. And all that means is that his meal is usually on the house.
His life consists of his morning stretching routine, instant coffee, feeding the pigeons on the fire escape, and writing short stories for his two grandkids. And he goes to bed every night with a big smile on his face.
Benjamin is unusual—he doesn’t need life insurance.
But if you’re in a period of life in which you carry significant financial responsibilities for the people you love, you’re not like Benjamin. You most likely DO need life insurance. And even if you already have a policy in place, there’s a good chance you don’t have enough coverage. LIMRA reported in 2021 that there are over 102 million people in America who are uninsured or underinsured—that’s almost one in three people!1
And with skyrocketing costs of living and an ever-changing economy, you likely need a review ASAP.
So if your responsibilities involve more than sharpening pencils and making sure your plants are watered, schedule a checkup with your licensed and qualified financial professional. It’s Life Insurance Awareness Month, so now is the perfect time to fine-tune your financial protection.
¹ LIMRA, Sep 2021, “Facts About Life 2021, Facts from Life Insurance Awareness Month, Help Protect Our Families”
Veronica is a 38 year old independent woman. She lives in a cabin at the edge of a lake on property owned by her best friend, Kim.
Veronica gardens, hikes, and plays solitaire while listening to old jazz records she inherited from her late parents. She has no kids. She owns no property, assets, or even a bank account for that matter. She doesn’t even have a mobile phone. She does have an old computer though, so she can keep track of what’s going on in the world. This allows her to communicate with Kim, who visits Veronica once a year to bring her seeds for her garden and a bottle of wine.
Veronica has no family, no dependents, no spouse, no parents, and no job. It’s just her and the cabin, the lake, and her vegetable patch—and you know what, she likes it that way.
Veronica’s situation isn’t typical. She really doesn’t need life insurance.
If you’re NOT like Veronica, meaning you do have kids, a spouse, a house, assets, a bank account, etc.—you probably need life insurance. And with the speed at which life changes these days, you probably need a life insurance review ASAP.
Veronica can remain off the grid, she’ll be just fine. But for those of us who live ON the grid, make a point to check in with your financial professional this Life Insurance Awareness Month to discuss your updated financial security needs.
Your credit history can have an impact on your eligibility for rental leases, raise (or lower) your auto insurance rates, or even affect your eligibility for certain jobs (although in many cases the authorized credit reports available to third parties don’t contain your credit score if you aren’t requesting credit). Because credit history affects so many aspects of financial life, it’s important to begin building a solid credit history as early as possible.
So, where do you start?
Store credit cards are a common starting point for teens and young adults, as it often can be easier to get approved for a store card than for a major credit card. As a caveat though, store card interest rates are often higher than for a standard credit card. Credit limits are also typically low – but that might not be a bad thing when you’re just getting started building your credit. A lower limit helps ensure you’ll be able to keep up with payments. Because you’re trying to build a positive history and because interest rates are often higher with a store card, it’s important to pay on time – or ideally, to pay the entire balance when you receive the statement.
Another common way to begin building credit is to become an authorized user on a parent’s credit card. Ultimately, the credit card account isn’t yours, so your parents would be responsible for paying the balance. (Because of this, your credit score won’t benefit as much as if you are approved for a credit card in your own name.) Another thing to keep in mind is that some credit card providers don’t report authorized users’ activity to credit bureaus.* Additionally, even if you’re only an authorized user, any missed or late payments on the card can affect your credit history negatively.
A secured credit card is another way to begin building credit. To secure the card, you make an initial deposit. The amount of that deposit is your credit line. If you miss a payment, the bank uses your collateral – the deposit – to pay the balance. Don’t let that make you too comfortable though. Your goal is to build a positive credit history, so if you miss payments – even though you have a prepaid deposit to fall back on – you’re still going to get a ding on your credit history. Instead, it’s best to use a small amount of your available credit each month and to pay in full when you get the statement. This will help you look like a credit superstar due to your consistently timely payments and low credit utilization.
As you build your credit history, you’ll be able to apply for credit in larger amounts, and you may even start receiving pre-approved offers. But beware. Having credit available is useful for certain emergencies and for demonstrating responsible use of credit – but you don’t need to apply for every offer you receive.
“Will Authorized User Status Help You Build Credit?” NerdWallet, Sep 24, 2021, https://discvr.co/2lAzSgt.
It’s linked to lung cancer and heart disease, and is associated with nearly 1 in 5 deaths in the United States.(1) But smoking damages more than your body. It can also seriously hamper your financial health in ways that might surprise you.
Cigarettes aren’t cheap. Prices per pack vary from $$6.11 in Missouri to $11.96 in New York, but the national average comes out to around $8.(2, 3) Smoking a pack per day will run you $56 per week, $224 per month, and $2,912 per year. Over 20 years you’ll have spent $58,240 on cigarettes. That’s a lot of money to light up!
But smoking carries more subtle costs. Hospital bills, medication, and treatment all cost money, and smoking bumps up your chances of needing those at some point in your future. In total, smoking-related illness costs the United States over $300 billion per year.(4) Smokers also have to face higher insurance costs because of the health risks presented by their habit. All told, smoking one pack per day costs around $15,000 a year, or $40 per pack.(5)
What would you do with $15,000? If you’re smoking a pack per day, your answer is to spend it on a highly addictive chemical that feels great in the moment but will damage your health long-term. But what would happen if you put that $15,000 to work? Could that be the cash you need to start building a business? Maybe that could be the foundation of your child’s college fund or inheritance. That nicotine hit might be what you think you need to destress or get out of bed in the morning, but it’s costing you more than short-term cash. It’s denying you the potential to live on your terms and start building your future.
Quitting cigarettes can feel daunting. They’re an easy coping mechanism that you might depend on. Imagining a day without lighting up with your morning coffee could be downright terrifying. But smoking costs you more than just 6 bucks per pack. It costs you more than your future health. The price of a quick nicotine fix could be stopping you from reaching your full potential and stealing life-changing opportunities.
Trying to quit? Check out these resources from the CDC.
¹ “Health Effects of Cigarette Smoking” CDC, https://www.cdc.gov/tobacco/data_statistics/fact_sheets/health_effects/effects_cig_smoking/index.htm
² “Cigarette Prices by State 2022,” World Population Review, https://worldpopulationreview.com/states/cigarette-prices-by-state/
³ “Economic Trends in Tobacco,” CDC, https://www.cdc.gov/tobacco/data_statistics/fact_sheets/economics/econ_facts/index.htm#
⁴ “ Hidden Costs of Smoking,” American Cancer Society, https://www.washington.edu/admin/hr/benefits/events/flyers/tobacco-free/hidden-cost-of-smoking.pdf
But by definition, your job ceases to become your source of income once you retire.
Instead, you’ll need to tap into new forms of cash flow that, most likely, will need to be prepared beforehand.
Here are the most common sources of retirement income. Take note, because they could be critical to your retirement strategy.
Social Security. It’s simple—you pay into social security via your taxes, and you’re entitled to a monthly check from Uncle Sam once you retire. It’s no wonder why it’s the most commonly utilized source of retirement income.
Just know that social security alone may not afford you the retirement lifestyle you desire—the average monthly payment is only $1,543.¹ Fortunately, it’s far from your only option.
Retirement Saving Accounts. These types of accounts might be via your employer or you might have one independently. They are also popular options because they can benefit from the power of compound interest. The assumption is that when you retire, you’ll have grown enough wealth to live on for the rest of your life.
But they aren’t retirement silver bullets. They often are exposed to risk, meaning you can lose money as well as earn it. They also might be subject to different tax scenarios that aren’t necessarily favorable.
If you have a retirement savings account of any kind, meet with a licensed and qualified financial professional. They can evaluate how it fits into your overarching financial strategy.
Businesses and Real Estate. Although they are riskier and more complex, these assets can also be powerful retirement tools.
If you own a business or real estate, it’s possible that they can sustain the income generated by their revenue and rents, respectively, through retirement. Best of all, they may only require minimal upkeep on your part!
Again, starting a business and buying properties for income carry considerable risks. It’s wise to consult with a financial professional and find experienced mentorship before relying on them for retirement cash flow.
Part-time work. Like it or not, some people will have to find opportunities to sustain their lifestyle through retirement. It’s not an ideal solution, but it may be necessary, depending on your financial situation.
You may even discover that post-retirement work becomes an opportunity to pursue other hobbies, passions, or interests. Retirement can be about altering the way you live, not just having less to do.
You can’t prepare for retirement if you don’t know what to prepare for. And that means knowing and understanding your options for creating a sustainable retirement income. If unsure of how you’ll accomplish that feat, sit down with your financial professional. They can help you evaluate your position and create a realistic strategy that can truly prepare you for retirement.
This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.
¹ “How much Social Security will I get?” AARP, https://www.aarp.org/retirement/social-security/questions-answers/how-much-social-security-will-i-get.html
You’re not afraid of emergencies. Between life insurance and your fully stocked emergency fund, you and your family are prepared for the financial ups and downs of life.
You’re not afraid of losing your job. You have enough saved for retirement already that you don’t depend on your paycheck. Besides, you may even have a side source of income (or three) to help make ends meet!
You certainly aren’t afraid to splurge on yourself. That’s right—you can spend your discretionary funds on the things you love and care about, footloose and fancy free.
You’re not afraid of your future. Why? Because you have a strategy in place, and you’re sticking to it. And you’re on track to retire with wealth instead of want.
Sure, there are metrics and benchmarks and numbers you should be concerned with. Ask a financial professional about what those would look like for you and your situation. They’re different for each person.
But the feeling is always the same—the end of fear, and a sense of peace. You’re ready to focus on the people and things that matter most.
Are you financially free? What steps have you taken to eliminate fear of emergencies, losing your job, treating yourself, and preparing for your future?
You know how it works. If your guess is the closest without going over, you win the prize. And whether it’s a cash pot, a season pass for your hometown’s team – or even just the jellybeans themselves, it’s a situation with a lot at stake. You’ve been presented with a ripe opportunity to prove your keen intellect, not to mention maybe winning some free candy!
You may start pulling out your old high school algebra equations. You may laboriously count the visible jellybeans so you can extrapolate the total. You may even pick the jar up and hold it to the light – shaking it and assessing any gaps in area coverage.
Take your time. It’s a big decision.
Unfortunately for many people, it seems not as much thought goes into estimating how much a life insurance policy may cost. Can you guess how much a policy might cost?
LIMRA’s 2021 Insurance Barometer study shed a little light on just how off these guesses can be: When Millennials surveyed were asked how much they thought a healthy 30-year-old would pay for a term insurance policy, their median guess was $1,000 – more than 6 times the actual cost!¹
That stat is pretty revealing: odds are that the number you have in mind is a lot higher than what you might actually end up paying for your policy. As a result, it may feel like you’re saving money right now by not having life insurance. But in the case of a sudden illness, the passing of a breadwinner, or an unexpected loss of income, not having (what is potentially affordable) protection for your loved ones feels as silly as writing down a guess of 1,000,000 jellybeans next to the mathematician’s answer of 1,086.
The bottom line: Have you overestimated how much a well-tailored life insurance policy could cost you? Not sure? Reconsider your guesstimate with a financial professional who knows the in’s and out’s of your needs and what coverage may be available that fits your budget. (It’s like knowing how many jellybeans are in the jar before you have to guess!)
¹ “Top Misconceptions About Life Insurance,” LIMRA, https://www.limra.com/siteassets/research/research-abstracts/2021/2021-insurance-barometer-study/2021_barometer-infographic.pdf.
Life insurance companies are more willing to offer lower premium life insurance policies to young, healthy people who will likely not need the death benefit payout of their policy for a while. (Keep in mind that exceptions for pre-existing medical conditions or certain careers exist – think “skydiving instructor”. But in many cases, the odds are more in your favor for lower premiums than you might guess.)
At this point you might be thinking, “Well, I am young and healthy, so why do I need to add another expense into my budget for something I might not need for a long time?”
Unlike a financial goal of saving up for a downpayment on your first house, waiting for “the right moment” to get life insurance – perhaps when you feel like you’re prepared enough – is less beneficial. A huge part of that is due to getting older. As your body ages, things can start to go wrong – unexpectedly and occasionally chronically. Ask any 35-year-old who just threw out their back for the first time and is now Googling every posture-perfecting stretch and cushy mattress to prevent it from happening again.
With age-related health issues in mind, remember that the premium you pay at 22 may be very different than the premium you’ll pay at 32. The reason is simple—most people physically peak by the time their 30.¹
If you’re feeling your mortality after reading those numbers, don’t worry! You’re probably not going to go to pieces like fine china hitting a cement floor on your 30th birthday. But there is one certainty as you age: your premium will rise an average of 8-10% on each birthday.² Combine that with an issue like the sudden chronic back problems from throwing your back out that one time (one time!), and your premium will likely reflect both the age increase and a pre-existing condition.
If you experience certain types of illness or injury prior to getting life insurance, it often goes in the books as a pre-existing condition, which will cause a premium to go up. Remember: the less likely a person is going to need their life insurance payout, the lower the premium will likely be. Possible scenarios like the recurrence of cancer or a sudden inability to work due to re-injury are red flags for insurance companies because it increases the likelihood that a policyholder will need their policy’s payout.
A person’s age, unique medical history, and financial goals will all factor into the process of finding the right coverage and determining the rate. So taking advantage of your youth and good health now without bringing an age-borne illness or injury to the table could be beneficial for your journey to financial independence.
¹ “A map of the ages when you peak at everything in life,” Digital Information World, March 16, 2021, https://www.digitalinformationworld.com/2021/03/a-map-of-ages-when-you-peak-at.html#
² “How Age Affects Life Insurance Rates,” Investopedia, June 29, 2021, https://bit.ly/2L7P0x6.
Even if you abide in a smaller house than you might have envisioned as a kid, it could still provide wonderful memories while offering a haven for your family.
Home ownership can be a desirable goal, but it may become a burden, however, if the home makes you “house poor”. Imagine if every spare penny had to go toward your mortgage or upkeep of your home with nothing left over. That’s the definition of things owning you instead of you owning things. Thankfully, there’s a different way.
If you’re in the market for a new home, there are four areas to consider before you start your serious search.
Save first. You might discover there are lots of ways you could buy a house with almost no money down. However, resist the temptation of low-down-payment loans. In what could be a still-volatile housing market, you would not want to run the risk of finding yourself in a negative equity position, which means you would owe more than your house is worth. You also may pay more for Private Mortgage Insurance, which is required for home loans with less than 20% down. Before you make your move, try to save up for the 20% down payment as well as any additional amounts to help cover closing costs. You’ll also want to have an emergency fund stashed away before you buy.
Think smaller. If you don’t need a “big” house, consider buying a smaller home. Everything in smaller homes may be less expensive to replace or maintain because there’s simply less square footage involved. (The purchase price could be lower as well.)
Keep your budget under 25%. The loan officer for your mortgage might say “yes” to an amount that would cause your monthly payments to be more than 25% of your take-home pay, but that doesn’t mean those payments will fit your budget. Leaving yourself some extra margin may help you navigate life’s surprises and may give you the freedom to save more, provide more for your kids’ college, or even plan that trip you’ve always wanted to take. Bear in mind that mortgage payments may include other fees, which may increase your final monthly payment amount significantly. A 30-year mortgage may provide flexibility
When you’re focused on how much you’re borrowing, a 15-year mortgage that pays down the debt faster may be tempting. Consider a 30-year loan, though. The potential flexibility of not being obligated to a possible higher monthly payment with a 15-year loan may come in handy when those unexpected emergencies happen.
All in all, it’s worth considering your long-term outlook before you even begin your new home search.
It helps protect your family during the grieving process, gives them time to figure out their next steps, and can provide income to cover normal bills, your mortgage, and other unforeseen expenses.
Here are some guidelines to help you figure out how much is enough to help keep your family’s future safe.
Who needs life insurance? A good rule of thumb is that you should get life insurance if you have financial dependents. That can range from children to spouses to retired parents. It’s worth remembering that you might provide financial support to loved ones in unexpected ways. A stay-at-home parent, for instance, may cover childcare or education costs. Be sure to take careful consideration when deciding who should get coverage!
What does life insurance cover? Life insurance can be used to cover a variety of unexpected expenses. Funeral costs or debts can potentially be financial and emotional strains, as can the loss of a steady income and employer-provided benefits. Think of life insurance as a buffer in these situations. It can give you a line of defense from financial concerns while you process your loss and plan for the future.
How much life insurance do you need? Everyone’s situation is different, so consider who would be financially impacted in your absence and what their needs would be.
If you’re single with no children, you may only need enough insurance to cover funeral costs and pay off any debts.
If you’re married with children, consider how long it might take your spouse to get back on their feet and be able to support your family, how much childcare and living expenses might be, and how much your children would need to attend college and start a life of their own. A rule of thumb is to purchase 10 times as much life insurance as income you would make in a year. For instance, you would probably buy a $500,000 life insurance policy if you make $50,000 a year. (Note: Be sure to talk with a qualified and licensed life insurance professional before you make any decisions.)
An older person with no kids at home may want to leave behind an inheritance for their children and grandchildren, or ensure that their spouse is cared for in their golden years.
A business owner will need a solid strategy for what would happen to the business in the event of their death, as well as enough life insurance to help ensure that employees are paid and the business can either be transferred or closed with costs covered.
Life insurance may not be anyone’s favorite topic, but it can be a lifeline to your family in the event that you are taken from them too soon. With a well thought out life insurance policy for you and your situation, you can rest knowing that your family’s future has been prepared for.
Just don’t ask Judy Marretta, formerly Judy Hillman, about it! When her ex-husband, Warren Hillman, passed away after a battle with a rare form of leukemia, she was the one who got the life insurance check. Warren’s widow didn’t see a penny of it–even the Supreme Court ruled in Marretta’s favor!
Why? When Warren remarried, he never changed the beneficiary designation on his life insurance policy.
All that time and money wasted on legal battles could have been avoided by changing a name on a form! Speaking of which… When’s the last time you reviewed your own life insurance policy? After reading this, you may already be scrambling through your files to find it!
Let’s check up on your policy together. Contact me today, and we can get the ball rolling on:
Discover the full story here… Forbes: “Supreme Court Favors Ex-Wife Over Widow In Battle For Life Insurance Proceeds.” 6.3.2013
If something unexpected were to happen, do you have enough savings to get you and your family through it and back to solid ground again?
If you’re not sure you have enough set aside, being blindsided with an emergency might leave you in the awkward position of asking family or friends for a loan to tide you over. Or would you need to rack up credit card debt to get through a crisis? Dealing with a financial emergency can be stressful enough – like an unexpected hospital visit, car repairs, or even a sudden loss of employment. But having an established Emergency Fund in place before something happens can help you focus on what you need to do to get on the other side of it.
As you begin to save money to build your Emergency Fund, use these 5 rules to grow and protect your “I did not see THAT coming” stash:
1) Separate your Emergency Fund from your primary spending account. How often does the amount of money in your primary spending account fluctuate? Trips to the grocery store, direct deposit, automatic withdrawals, spontaneous splurges – the ebb and flow in your main household account can make it hard to keep track of the actual emergency money you have available. Open a separate account for your Emergency Fund so you can avoid any doubt about whether or not you can replace the water heater that decided to break right before your in-laws are scheduled to arrive.
2) Do NOT touch this account. Even though this is listed here as Rule #2, it’s really Rule #1. Once you begin setting aside money in your Emergency Fund, “fugettaboutit”… unless there actually is an emergency! Best case scenario, that money is going to sit and wait for a long time until it’s needed. However, just because it’s an “out of sight, out of mind” situation, doesn’t mean that there aren’t some important features that need to be considered for your Emergency Fund account:
You definitely don’t want this money to be locked up and/or potentially lose value over time. Although these two qualities might prevent any significant gain to your account, that’s not the goal with these funds. Pressure’s off!
3) Know your number. You may hear a lot about making sure you’re saving enough for retirement and that you should never miss a life insurance premium. Solid advice. But don’t pause either of these important pieces of your financial plan to build your Emergency Fund. Instead, tack building your Emergency Fund onto your existing plan. The same way you know what amount you need to save each month for your retirement and the premium you need to pay for your life insurance policy, know how much you need to set aside regularly so you can build a comfortable Emergency Fund. A goal of at least $1,000 to three months of your income or more is recommended. Three months worth of your salary may sound high, but if you were to lose your job, you’d have at least three full months of breathing room to get back on track.
4) Avoid bank fees. These are Emergency Fund Public Enemy No. 1. Putting extra money aside can be challenging – maybe you’ve finally come to terms with giving up the daily latte from your local coffee shop. But if that precious money you’re sacrificing to save is being whittled away by bank fees – that’s downright tragic! Avoid feeling like you’re paying twice for an emergency (once for the emergency itself and second for the fees) by using an account that doesn’t charge fees and preferably doesn’t have a minimum account balance requirement or has a low one that’s easy to maintain. You should be able to find out what you’re in for on your bank’s website or by talking to an employee.
5) Get started immediately. There’s no better way to grow your Emergency Fund than to get started!
There’s always going to be something. That’s just life. You can avoid that dreaded phone call to your parents (or your children). There’s no need to apply for another credit card (or two). Start growing and protecting your own Emergency Fund today, and give yourself the gift of being prepared for the unexpected.
¹ “Nearly 25% of Americans have no emergency savings,” Quentin Fottrell, MarketWatch, Jun 9, 2020, https://www.marketwatch.com/story/nearly-25-of-americans-have-no-emergency-savings-and-lost-income-due-to-coronavirus-is-piling-on-even-more-debt-2020-06-03
If your family’s quality of life were suddenly threatened, you’d step in, wouldn’t you? Of course you would!
Having a well-thought-out, tailored-to-you life insurance policy is a way to preemptively and proactively protect your family’s quality of life.
Here’s an eyebrow raiser: 36% of people surveyed intended to buy life insurance at some point, but only 54% actually have coverage!¹ Despite people’s good intentions, ownership is actually decreasing.
Here’s an eyebrow lowerer: Life insurance can be thought of as a financial safety net. One that gives your family the time and space to recover and rebuild in the event of trying financial circumstances.
Odds are, you already think life insurance is a good idea. But waiting until tragedy or a sudden loss of income strikes is waiting too long to consider the benefits of life insurance.
Give me a call or shoot me an email, and together we can take your unique circumstances into consideration and put together a life insurance policy that fits your needs.
“2020 Insurance Barometer Study Reveals a Significant Decline in Life Insurance Ownership Over the Past Decade,” LIMRA, Jun 2, 2020, https://www.limra.com/en/newsroom/news-releases/2020/2020-insurance-barometer-study-reveals-a-significant-decline-in-life-insurance-ownership-over-the-past-decade/